I am pleased to be here this morning to present the Commission with the Division of Investment Management's recommendations for amendments to Form ADV, the investment adviser registration form, and related rules under the Advisers Act.

The proposals we are recommending to you today may be the most significant Commission initiative under the Advisers Act since the Act was enacted in 1940. The package before you this morning has three major components that will work together to increase the quality of disclosure clients receive about their investment advisers, reduce regulatory burdens on advisers, and improve our ability to administer the Advisers Act. In other words, we have something for everyone.

Let me take a few moments to describe the components of this package before answering your questions.

As you mentioned Mr. Chairman, the rules we are recommending will lead to electronic filing by advisers through a system being built by NASDR. We expect the filing system, the IARD, to be ready to accept electronic filings from advisers later this year.

Currently, advisers must make copies of their Form ADV, cut checks for fees, and send multiple packages, usually by overnight delivery. Using the IARD, an adviser will be able to file its Form ADV with us, send notice filings to the states, and pay the state fees, all with a click of the mouse on a desktop computer. Advisers would open an account with NASDR, and all fee payments would be automatically debited when due. The IARD will bring significant efficiencies to investment advisers.

The system also will bring substantial efficiencies to the operations of the SEC and state regulators, allowing us to leverage our limited resources. Our examiners will be able to view advisers' filings quickly and easily, and will be able to use this information in their planning and preparation. The Division will have better information about the industry, including industry trends.

The second and third components of our recommendations are designed to get better information to investors about advisers.

The information from the thousands of filings that advisers make on the IARD will form a public access database of information about advisers. This will include information about their services, fees, and any disciplinary problems they may have had. Investors will be able to search this database through our web site, free of charge. Never before have investors had such easy access to current information about investment advisers.

Finally, we are proposing changes to improve the brochure that advisers must give to their clients. The brochure is the primary disclosure document we require under the Advisers Act. It provides clients with vital information about the adviser's business practices, including conflicts of interest between the adviser and its clients. The proposals before you would require advisers to give clients a narrative brochure written in plain English, and to give clients updates of the brochure to reflect material changes.

Three years ago, under your leadership, Mr. Chairman, the Commission approved a similar effort to bring plain English disclosure to mutual funds. Today I can report that the effort was an unqualified success. All of the prospectuses we review today are more understandable; some are even enjoyable to read. (But I admit it may be an acquired taste.)

The new brochure proposals build on that success. They would apply the same principles to make these documents more accessible to clients.

In addition to requiring that the brochures be drafted in plain English, we would update the disclosure requirements to address new issues of vital importance to advisory clients. We recommend better disclosure about soft dollar practices, about how advisers vote proxies on behalf of clients, and a more informative discussion of conflicts of interest advisers have with clients.

One important innovation would be the new "brochure supplements." Under our current rules, a client is told about the background of the firm's top management, but nothing about the person sitting across the table, even though that may be the person on whom the client is relying for advice. The brochure supplements would be short documents  like a resume  but would fill a current gap in disclosure.